By Karan Kumar — Exclusive to Graphite Investing News
Graphite, one of four forms of crystalline carbon, is chemically inert and is the most electrically and thermally conductive of the non-metals, both of which make it desirable for many industrial applications.
Most western governments classify graphite as a “critical mineral” and depend on supplies from China, Brazil, and India, which produce nearly all of the world’s graphite. China, for example, accounts for more than 70 percent of global supply, while the United States produces none.
China’s dominance, along with rising demand for graphite – especially flake graphite to feed new applications such as batteries and nuclear reactors – has prompted many Canadian miners to take the lead in filling the gap. Exploration in the province of Quebec has surged in the past few years.
Globally, demand for graphite is about 1.14 million tonnes, split evenly between the large-flake variety and amorphous graphite used for industrial purposes, The Globe and Mail reported. “People talk about a 1.6-million-tonne market by 2020, meaning you’ll need 600,000 tonnes extra graphite in coming years, but that’s a bullish figure. I think it’s closer to 200,000 tonnes,” Simon Moores, a graphite market specialist for Industrial Minerals, said.
Economic and geopolitical concerns
Canada is a G7 nation with a strong economy and vast mineral resources, including oil and metals. In 2011, Canada’s GDP growth was 2.6, slightly higher than Statistics Canada’s estimation of 2.5 percent.
Quebec boasts a favorable tax regime, good infrastructure, a qualified workforce, and up-to-date geoscientific knowledge. The provincial government’s report on the mining sector says that the mining act “covers the granting and management of mining titles,” adding that where minable substances are discovered, “the claim holder has a reasonable assurance of obtaining the right to mine the resource in question.”
In addition, the corporate tax rate, federal and provincial combined, is one of the lowest in North America at 26.9 percent in 2012. Other benefits includes a refundable tax credit relating to resources, under which eligible mining corporations can obtain a refund of up to 38.75 percent of eligible exploration expenses incurred in the province.
In a March report on economic growth prospects for Canada’s provinces, the Royal Bank of Canada said it expects Quebec’s economy to grow 1.6 percent in 2012, unchanged from last year. “This would constitute the weakest back-to-back performance outside a recession since 1995-1996. We project only a slight acceleration to 1.9 percent in 2013.” While Quebec is not expected to match growth seen in Alberta, Ontario, or British Columbia, the report said it sees positive signs for business investment in 2012. “Private firms intend to boost their non-residential capital spending by 8.5 percent this year, following a strong increase of 12.3 percent in 2011. Virtually all of this increase will take place in the mining and utilities sectors.”
Quebec holds graphite potential
With prices for flake graphite at an all-time high, graphite is the new rare earth, the new darling of the industry. As of January of this year, Quebec had 24 operating mines and over 250 surface mineral extraction sites, according to a report by the Government of Quebec’s natural resources department. While minerals such as iron ore concentrate, gold, copper, zinc, nickel, niobium, titanium, platinum, and cobalt are already mined in the province, Quebec has “strong potential…for discoveries of new substances,” the report said.
“There is also potential in Quebec for graphite, and the Lac des Iles…is already active in the Mont-Laurier region,” the report added. “Elsewhere in Quebec, especially in the Grenville geological province, graphite exploration projects have reached an advanced exploration stage or are in the development stage. The most advanced is the Lac Knife…project south of Fermont.”
Focus Metals Inc. (TSXV:FMS) owns 100 percent of the Lac Knife graphite deposit. The property, some 35 kilometers south of Fermont, Quebec, is at the pre-development stage. Scheduled for commissioning in 2014, the mine is expected to produce 25,000 tons of graphite per year.
According to an article by The Globe and Mail, of all the exploration going on currently, whether in Quebec or Ontario, only a few projects are close to the production state. The first one to produce commercial graphite will likely be Ontario Graphite Ltd. followed by Northern Graphite Corp. (TSX:NGC), both of which have properties based in Ontario.
Several graphite miners head to Quebec
Besides Focus Metals, many other miners have properties in Quebec that are currently at various stages of exploration. Among them, Vancouver-based Standard Graphite Corp. (TSX:SGH) has about a dozen exploration projects, nine of them in Quebec, in the three major graphite districts in the province: Wakefield, North Shore, and New Quebec.
British Columbia-based Velocity Minerals Ltd. (TSX:VLC) said last month that it had obtained an option to acquire 100 percent of three historic Quebec graphite properties situated in Southwestern Quebec. “Each property is capable of hosting a standalone graphite mineral deposit and the company believes that each property may host a near surface high value graphite deposit,” the company said.
Big North Graphite Corp. (TSX:NRT), which is about to commence an exploration program for graphite in Ontario, last month announced an option with Zimtu Capital Corp. (TSX:ZC) and three of its prospecting partners to earn a 100 percent interest in the Grand Lac du Nord graphite property in East Quebec.
Securities Disclosure: I, Karan Kumar, hold no direct investment interest in any company mentioned in this article.